UK: UK Employment Law Update, Summer 2013

The Employment Law Updates are aimed at providing snapshot
information on recent developments in UK employment law and also a
brief practical insight in managing workplace issues on a proactive
basis.

1. ALL CHANGE – EMPLOYMENT LAW REFORM

Fees for employment tribunal and employment
appeal tribunal claims are now in force with effect from 29
July 2013 for all new claims. Tribunal fees will be
charged in two stages, the first at the issue of the claim and the
second prior to the Hearing. The introduction of fees is currently
the subject of a judicial review challenge by Unison, which Hearing
will take place in October 2013.

The Government has recently published a factsheet giving
guidance on fees. Click here for factsheet. The Issue and Hearing
fees of £250 and £950 respectively for
ordinary detriment/dismissal claims are payable by the Claimant but
with a remission scheme in place for those who cannot afford the
fee, a Respondent employer may not be aware that a claim has been
issued for some time after the limitation period has expired. The
Tribunal will reject a claim if it is not accompanied by a Tribunal
fee or a remission application. If the Claimant does not pay the
relevant fee by the specified date, the claim will be dismissed
without further order. This could leave a Respondent unaware that
the Hearing will not be effective creating considerable
uncertainty. The fee for judicial mediation is now £600 and
is payable by the Respondent employer. There is no provision for
the Tribunal to refund the fee once it is paid. However, if a claim
is settled before the Hearing the Respondent employer may end up
being asked to pay for the fees paid as part of a compensation
package.

New rules are also in place for the revised Tribunal
procedure with effect from 29 July 2013.
Among other changes the new rules combine case management
discussions and pre-hearing reviews into one preliminary hearing
and introduce an initial paper sift. A new ET1 Claim Form is also
introduced. The overriding objective remains that parties are on an
equal footing, cases are dealt with proportionately to the
complexity and importance of the issues, avoid unnecessary
formalities, delays and save expense. With the new initial sift
stage, an employment Judge will automatically review every case on
paper once the claim and response forms have been submitted. Cases
which have no reasonable prospect of success will be struck out,
subject to an appeal. Case management directions will then be given
if the claim is to proceed. The Respondent will now be able to
apply for an extension of time either before or after the original
28 day deadline for filing the ET3. The draft ET3 should accompany
any application for an extension where the deadline has
passed.

Another significant change relates to unfair dismissal and the
new cap on the compensatory award. For dismissals
after 29 July 2013, the statutory limit on
compensation is the lower of £74,200
(reviewed annually) or 52 x a week's pay of the Claimant, i.e.
1 year's salary. This may have a significant effect on the
number of claims when coupled with the new costs regime for
prospective Claimants. Claims may fall by as much as 25%.

Compromise Agreements are renamed Settlement
Agreements with effect from 29 July 2013.
From that date employers and employees will be able to enter into
confidential discussions about termination of employment which will
be inadmissible thereafter in ordinary unfair dismissal claims.
ACAS has produced a statutory Code of Practice on settlement
agreements, available from here, and a Guide to Settlement Agreements.
This pre-termination negotiation can be initiated by either the
employer or the employee as a means to ending the employment
relationship before any formal dispute has arisen. If a settlement
is not agreed, an employee may still bring a claim but he or she
will not be entitled to include evidence about the termination
discussions in the claim. Under the Code, as a general rule a
minimum of 10 days should be allowed to the parties to consider the
terms of agreement and to receive independent advice unless the
parties agree otherwise. The protection from disclosure is limited
to normal unfair dismissal claims and it will not apply to
discrimination, whistleblowing or contract claims. Discussions will
be discloseable if there has been any improper behaviour by either
party such as bullying or undue pressure on the party during the
discussions to accept the terms of settlement.

Interest on unpaid employment tribunal awards at 0.5% accrue
from the day after the relevant decision day with effect from
29 July 2013 but no interest will be payable if
the full amount of the award is paid within 14 days of the relevant
decision day. Interest on unpaid discrimination awards for claims
brought after 28 July 2013 has risen up from 0.5%
to 8%.

2. EMPLOYEE SHAREHOLDER STATUS

This new type of employment status whereby employees give up
some of their important employee rights in exchange for an award of
shares worth at least £2,000 comes into effect on 1
September 2013. There are very detailed and complex tax
requirements to be satisfied if the employee is to be given this
special status. The Company is required to provide a written
statement of the particulars of the status of the employee
shareholder. The employee must obtain advice from an independent
adviser as to the terms and effect of the written statement and
there is a cooling off period of 7 days. The Company must also pay
the reasonable costs of the employee in obtaining advice whether or
not the employee becomes an employee shareholder. Apart from the
complex tax issues, a number of significant issues remain unclear,
such as buy back, forfeiture and leaver provisions so the
practicality of this new status option may deter all but the most
experienced employers.

3. DIRECTORS' PAY

The Government has published regulations setting out the
information which should be included in the directors'
remuneration report with effect from 1 October
2013. The remuneration report which the directors of a
quoted company are required to prepare under the Companies Act 2006
should include a single total figure table of remuneration in
respect of each person who was a director during the relevant
financial year, payments made to directors for loss of office and a
performance graph which sets out the total shareholder return of
the company on equity share capital.

4. MANDATORY EARLY CONCILIATION

The Government has responded to the consultation on early
conciliation which is intended to be introduced in April
2014. It has decided to impose a duty on the parties and
ACAS to attempt early conciliation of employment disputes
before most tribunal claims are issued. This will
require individuals bringing a claim to first notify ACAS through
an online form. This means conciliation will come at the beginning
of the litigation process before costs begin to escalate. ACAS has
secured funding ahead of the employment law changes to enable their
participation. Prospective Claimants will remain responsible for
ensuring they present claims to a Tribunal within the relevant
statutory time limits. As the proposed rules of procedure will
require Claimants to include the conciliation reference number
given to them by ACAS on their ET1 form to demonstrate compliance
with the requirement for early conciliation, if this is not done,
the Tribunal will dismiss the claim. This reform may also have a
significant impact on future claims made to a Tribunal after a
failure to settle matters mutually.

5. DATA PROTECTION AND SUBJECT ACCESS REQUESTS

The Information Commissioner's Office has published new
guidance for organisations to help them deal with requests for
individuals for their data.

Under the Data Protection Act anyone has the right to find out
what information an organisation holds about them by making subject
access requests. Once received an organisation normally has 40 days
to reply to the request. As part of the launch of the publication
of the new code of practice the Information Commissioner's
Office has published 10 simple steps which organisations should
consider when responding to subject access requests:

Identify whether a request should be considered as a subject
access request

Make sure there is enough information to be sure of the
requester's identity

If more information is needed from the requester to find out
what they want, then ask at an early stage

If a fee is to be charged, ask for it promptly

Check whether the information the requester wants is
available

Do not be tempted to make changes to the records, even if they
are inaccurate or embarrassing

But do consider whether the records contain information about
other people

Consider whether any of the exemptions apply

If the information includes complex terms or codes, then make
sure these are explained

6. CASTE LEGISLATION

The Government has published a timetable for introducing caste
legislation under the Equality Act 2010. Caste will be included
within the definition of the protected characteristic of
"race". A public consultation is planned for spring
2014 with a final draft order to be introduced
during the summer of 2015.

7. WORK EXPERIENCE AND HEALTH AND SAFETY

The Government has reduced and simplified health and safety
requirements for young people being taken on as work experience
students by employers. The Health & Safety Executive has issued
revised guidance to employers on placements for young people.
Employers do not have to take out special insurance policies to
cover students on work experience and making it clearer and easier
for employers and work experience organisers to check appropriate
measures are in place. Employers with fewer than 5 employees do not
need a written risk assessment and repeat assessments are not
required for all new work experience students. The new HSE guidance
is available here.

8. FREEZE ON RED TAPE FOR SMALL BUSINESSES

The Government has stated that the moratorium exempting
businesses with fewer than 10 employees from new regulations will
be extended to firms with up to 50 staff and will
continue beyond 2014.

9. TERMINATION PAYMENTS – TAX REVIEW

In August 2013 the Office of Tax Simplification
produced an interim report on the review of employee benefits and
expenses. One of the areas to be prioritised for further review is
termination payments. The report provides an interesting read for
HR professionals and payroll providers, in particular the exemption
for taxation of the first £30,000 of any termination payment
and the tax treatment of PILONs. The Government is being urged to
consider increasing the £30,000 tax free threshold which if
adjusted for inflation would rise to £71,000 at today's
value. The report is available here.

10. TAX FREE CHILDCARE

The Government has issued a consultation on the design and
operation of tax free childcare. It is proposing to introduce a new
scheme to replace the employer supported childcare capped at an
annual limit of £1,200 per child. The new scheme will be
phased in in Autumn 2015 when parents of children
up to the age of 5 and disabled children under the age of 17 will
be eligible. The existing childcare voucher scheme will remain open
to new joiners until the new scheme is introduced. At that time
members of the voucher scheme may choose to remain in that scheme
or switch scheme.

11. HOLIDAY PAY TO INCLUDE VOLUNTARY OVERTIME

Neal v Freightliner Ltd 131532/2012

This is a first instance decision and therefore not binding on
other tribunals but it is an interesting case. The Employment Judge
held that Mr Neal's employer should have taken his overtime
payments into account when calculating his holiday pay in respect
of the minimum 4 weeks' statutory annual leave required by the
Working Time Directive.

Statutory holiday pay is to be calculated using "a
week's pay" provision in the Employment Rights Act 1996.
In the 2011 British Airways case, the ECJ held that under EU law
workers taking statutory holiday were entitled to receive their
normal remuneration. This included not only basic salary but also
remuneration intrinsically linked to the performance of their tasks
that they were required to carry out under their contracts.

In this case Mr Neal had always worked more than his contractual
7 hour shifts, regularly working 8½ or 9 hours. When he
complained about the calculation of his holiday pay entitlement
Freightliner argued that he was only entitled to holiday pay
calculated on the tasks under his 7 hour shift which he was
required to carry out under his contract of employment and any
overtime was voluntary so was not included. The Employment Judge
disagreed. During his overtime periods he was performing tasks that
he was required to do under his contract. Although he might have
volunteered to perform those tasks this did not mean that they were
not linked to the normal remuneration test. Where a worker's
overtime varies from week to week so that he or she has no normal
working hours, a week's holiday pay should be based on the
worker's average weekly remuneration in the period of 12 weeks
before the holiday.

Key point: For the time being until the matter
is being considered further by the EAT employers should consider
taking voluntary paid overtime into account when calculating
holiday pay for the first 4 weeks of statutory leave but not for
the additional 1.6 weeks' leave, distinguishing between the
entitlement under the Working Time Regulations and the Working Time
Directive which does not specify how holiday pay should be
calculated.

12. SICKNESS AND HOLIDAY LEAVE CARRY OVER

Sood Enterprises v Healy UKEATS/0015/12

The EAT has confirmed that the Working Time Directive does
not require the carryover of the additional 1.6
weeks' leave under Regulation 13A of the Working Time
Regulations 1998 where a worker is prevented from taking holiday
due to his long term sickness absence. The Working Time Regulations
which provide for the additional 1.6 weeks' leave is a domestic
provision only.

Mr Healy worked for Sood as a handyman and carwash worker. He
was entitled to 28 days' statutory annual holiday. He suffered
a stroke in July 2010 and was off work until he resigned in June
2011. His absence straddled two holiday years, but he had some
untaken holiday leave in 2010 and a pro rata holiday entitlement
for 2011. When he received no payment in lieu of accrued holiday
leave he brought a claim for unpaid holiday pay. When he was
successful Sood appealed. The EAT held that Mr Healy was entitled
to carry over only the basic 4 weeks' holiday leave and not the
additional 1.6 weeks' leave from 2010 as there was no relevant
agreement between Mr Healy and Sood for carrying over this
additional leave, under Regulation 13A(7).

Key point: An employee on long term sick leave
is allowed to carry over the basic allowance of 4 weeks' annual
leave that is guaranteed under the Directive automatically without
the need to request this leave. Employers should be careful when
calculating the number of carry over days or a payment in lieu of
accrued but unused holiday where an employee has been on long term
sick leave. If there is a limited contractual right to carry over
the 5.6 weeks' holiday leave, under a relevant agreement under
Regulation 13A(7) employees should be advised clearly of their
right.

13. TUPE

- organised grouping

Ceva Freight (UK) Ltd v Seawell Ltd XA118/12

Mr Moffatt who did not take part in this appeal, was a logistics
coordinator working for Ceva. He worked on Ceva's Seawell
contract almost 100% of his time. The other 5 employees who worked
on the contract spent only a small percentage of their time on it.
When Seawell took the decision to bring the work carried out by
Ceva in-house, Ceva claimed that TUPE applied so as to transfer Mr
Moffatt's employment to Seawell, but Seawell disagreed and
refused to take him on. Seawell claimed it had taken back in-house
all of the work that had been carried out for them by Ceva not just
those aspects of the work which had been carried out by Mr Moffatt.
The conditions for a service provision change under Regulation 3 of
TUPE had not therefore been met.

Before an employment tribunal Mr Moffatt claimed that he had
been unfairly dismissed by either Ceva or Seawell. The Tribunal
found that his employment had transferred to Seawell and that it
was liable for his unfair dismissal. This was overturned on appeal
where the Appeal Judges held that even though an "organised
grouping" could be just a single employee it did not mean that
if a single employee spends all of his time on work for a
particular client he necessarily constitutes an organised grouping
of the TUPE purposes.

Organised grouping connotes a deliberate putting together of a
group of employees for the purpose of relevant client work. On a
further appeal by Ceva the Inner House of the Court of Session
upheld the EAT's judgment. Where the activities are carried out
by a number of employees the reference in the definition to an
organised grouping to a single employee does not warrant his or her
isolation from that group. Mr Moffatt could not therefore be
separated from others in the group and be held alone to have been
transferred. He had therefore been unfairly dismissed by Ceva.

Key point: Although service provision change
provisions will be repealed under the TUPE reforms this is still
some time away so this case shall remain relevant. An employer
cannot currently assume that an employee who spends 100% of his
time on a particular contract will transfer when the activities are
transferred to a new provider or back in house.

- dynamic interpretation concerning collective agreements

Alemo-Herron and others v Parkwood Leisure
C-425/11

The ECJ considered in this case whether the Acquired Rights
Directive allows national law to provide that transferees are to be
bound by post-transfer collectively agreed terms even where they
cannot be involved in the negotiation process. In contrast, Article
16 of the Charter of Fundamental Rights of the European Union an
employer must have the right to conduct its
business and assert its interests effectively in a contractual
process to which it is party. This allows an employer to negotiate
the process of determining changes in the working conditions of its
employees with a view to its future economic activity. A dynamic
interpretation of the Directive was therefore inconsistent with the
Charter.

The issue before the European Court was whether the clauses in
employment contracts which obliged a transferee employer to follow
the future determination of a third party (such as a national
negotiating body), in setting pay, were binding on the transferee
employer.

Mr Alemo-Herron worked for the London Borough of Lewisham and
was TUPE transferred to Parkwood Leisure, a private sector company
which was not a member of the National Joint Council for local
government services as Lewisham was. After the TUPE transfer
Parkwood refused to pay him an increased pay rate later agreed by
the NJC. He claimed that the construction of clause referring to
the NJC bound Parkwood as a result of the TUPE transfer and that
such a failure to pay the increased rate constituted an unlawful
deduction from wages. A tribunal rejected his claim but the EAT
allowed the appeal. The Court of Appeal then overturned it and Mr
Alemo-Herron appealed to the Supreme Court who held that as
Parkwood was unable to participate in the NJC it could not
therefore assert its interests effectively under the Charter.
Member States are therefore precluded from providing that dynamic
clauses referring to collective agreements negotiated and adopted
after the date of the TUPE transfer are enforceable against the
transferee.

Key point: This judgment aims to restore a fair
balance between the interests of the transferring employees and
their new employer particularly in transfers from the public to the
private sector.

14. EQUAL PAY – COMPARATORS AT DIFFERENT
ESTABLISHMENTS

North and others v Dumfries and Galloway Council [2013]
UKSC 45

After 6 years litigation the Supreme Court held that in this
case 251 classroom assistants could bring equal pay claims citing
as comparators employees who worked at different establishments
under different terms and conditions. The classroom assistants
compared themselves with a variety of manual workers employed by
the local authority, namely groundsmen, refuse collectors, refuse
drivers and a leisure attendant. The case will now proceed finally
to a full merits hearing.

The Tribunal had originally decided that the Claimants were in
the same employment and for an equal pay claim to proceed, a
Claimant A and a comparator B must work for the same or an
associated employer and either be employed in the same
establishment or at establishments where common terms apply, either
generally or as between A and B.

Key point: The issue is whether comparator B
would remain on the same terms and conditions even if he were
employed in the same establishment as Claimant A.

15. DISMISSAL AFTER MULTIPLE GRIEVANCES WAS VICTIMISATION

Woodhouse v West North West Homes Leeds Ltd [2013]
UKEAT007/12

Mr Woodhouse was employed by West North West Homes. He
complained that Mr Chapman of Leeds City Council with whom he had
to work closely displayed a racist attitude towards him. His
original grievance was rejected, but over a period of time he
submitted at least 9 grievances complaining about matters at work,
the underlying reason for which that he was being treated less
favourably on the grounds of his race. All of his grievances were
rejected and he brought 8 claims in the employment tribunal.

He was eventually dismissed by West North West Homes on the
basis that trust and confidence in him had irretrievably broken
down. He then brought claims in the tribunal alleging unfair
dismissal, discrimination, victimisation and harassment. Although
it was found that he had been unfairly dismissed his compensation
was reduced by 90%. He further appealed that this dismissal was an
act of victimisation and against the reduction in compensation to
10% of the full value of his claim. he EAT disagreed with the
employment tribunal's finding that an employer who dismissed
its employee because of the breakdown in trust and confidence was
not victimisation. The EAT held that his grievances and tribunal
claims were protected acts. He was dismissed because he made those
protected acts and his victimisation claim was made out.

This case was not on all fours with the case of Martin v
Devonshire Solicitors where Ms Martin was dismissed for making
wholly false and highly disruptive allegations. The EAT held that
Mr Woodhouse was acting entirely sincerely and not in bad faith so
the reduction in compensation fell away as it was
unsustainable.

Key point: Employers will find it very
difficult to dismiss fairly employees in a similar situation where
they fear future complaints of the same order. Martin is very much
an exceptional case where the reasons for dismissal were genuinely
separate from the protected acts. Employees in positions similar to
Mr Woodhouse may have to be managed out with appropriate
compensation under a settlement agreement.

16. REDUNDANCY

- collective consultation

Both these cases concern section 188 of the Trade Union and
Labour Relations (Consolidation) Act 1992. This section requires
collective consultation where an employer is proposing to dismiss
as redundant 20 or more employees at one establishment within a
period of 90 days. The EAT in both the Woolworths and Ethel Austin
cases held that the words "at one establishment" should
be deleted from section 188 as it was more restrictive than the
Collective Redundancies Directive 98/59/EC. It is understood the
Secretary of State has applied to the EAT requesting permission to
appeal the decision.

The effect of this significant decision is that an employer will
need to consult collectively whenever it proposes to dismiss as
redundant 20 or more employees within a 90 day period irrespective
of where those employees are located.

When both the retail chains went into liquidation many employees
lost their jobs. Union representatives brought claims for a failure
by the administrators to inform collectively on the redundancies
and the claims were upheld entitling the employees to a maximum
protective award of 90 days' pay in respect of the Austin
employees and 60 days' pay in the Woolwoorths employees. When
assessing who was entitled to these payments the Tribunal took the
view that each individual store constituted an establishment so the
administrators were not required to inform or consult at those
establishments where fewer than 20 employees were based. Some 4,400
workers were therefore not entitled to a protective award. The
union successfully appealed. The EAT held that the limitation to
dismissals at one establishment in section 188 was more restrictive
than the Directive. The issue was then whether the EAT should give
section 188 a purposive interpretation so as to be compliant with
the Directive. It held that it was entitled to interpret section
188 so as to be compliant with the Directive and went on to find
that the words "at one establishment" should be
deleted.

Key point: This Judgment requires employers at
least for the time being to consult collectively where 20 or more
employees in aggregate are to be made redundant within a 90 day
period across the business irrespective of where they work. The
maximum protective award for failure to inform and consult remains
at 90 days' pay, although the period is now a minimum period
for consultation is 45 days where 100 or more employees are to be
dismissed and 30 days where 20 to 99 employees are to be dismissed.
For future redundancy exercises employers should note the
significant change. Although an employer must look at the entire
workforce to determine the number of redundancies, proposed
consultation is still only required in respect of those employees
who may be affected by the dismissals.

- bumping

Contract Bottling Ltd v Cave UKEAT/0525/12

Achieving the perfect pool for relevant employees in a
redundancy exercise can be a headache for employers. In this case
the employer decided to lump everyone together in one pool
consisting of all of its employees of more than one kind and
applied a generic scoring matrix. It decided to retain those who
scored well in the matrix irrespective of their skills who it then
would need to re-train. Ms Cave and Ms McNorton who were dismissed
for redundancy brought claims. The tribunal held that the selection
process was substantially unfair and that there was no meaningful
consultation or consideration of alternatives to dismissal. An
appeal by Contract Bottling was unsuccessful but the case was
remitted to consider whether there should be a Polkey
deduction.

The Tribunal had declined to reduce compensation and the Appeal
Tribunal considered that the Tribunal's reason for not doing
this was insufficiently dealt with. The Tribunal is therefore to
consider afresh whether the compensation awards should reflect the
fact that Ms Cave and Ms McNorton would have been dismissed, even
if a fair procedure had been followed.

Key point: An employee may be dismissed for
redundancy where the employee's own job remains but the needs
of the business for different kinds of employees reduces. These
dismissals were a form of bumping. There was a diminution in the
requirement of Contract Bottling's business for work of several
kinds, not just the individual's kind of work, so the test for
redundancy was met.

- enhanced redundancy terms – whether contractually
binding

Shumba and others v Park Cakes Ltd 2013 EWCA
Civ974

The Claimants were employed in a business originally within the
Northern Foods Group. In 2007 the business was sold to Vision Group
and their employment transferred to Park Cakes Limited under TUPE.
The case before the ET was that Northern Foods had operated a
formal redundancy scheme under which enhanced terms and a lump sum
were paid. Park Cakes claimed that the group-wide policy of paying
enhanced redundancy terms was a matter of policy and not a
contractual entitlement. This was accepted by the ET who held that
the employees had been unfairly dismissed but they were unhappy
that their claims for redundancy were rejected and their union
appealed to the EAT who agreed with the Tribunal but the ET's
reasoning on the redundancy policy was flawed. Park Cakes then
appealed this issue to the Court of Appeal but were unsuccessful.
The case was remitted to a fresh tribunal for a final
determination.

The enhanced redundancy scheme was described in various internal
documents and had been followed for several years but the tribunal
was not clear that in its decision that although the enhanced
payments policy had been followed without exception for several
years why the policy should not apply to these Claimants and why
the policy was not contractually binding.

The Court of Appeal provided useful guidance on the factors that
should be taken into account when identifying whether an enhanced
redundancy policy is contractual or not, namely:

On how many occasions, and over how long a period, the benefits
in question have been paid

Whether the benefits are always the same

The extent to which the enhanced benefits are publicised
generally

How the terms are described

What is said in the express contract

Equivocalness i.e. the matter is one of discretion

The object is to ascertain what the parties must have or must be
taken to have understood from each other's conduct and words
applying the ordinary contractual principles. The focus has to be
on what the employer communicated to the employees. What the
employers may have personally understood or intended was irrelevant
except to the extent that the employees are or should reasonably
have been aware of it.

Key point: This list is not exhaustive but it
provides a helpful framework when considering the contractual
status of redundancy enhancements. The Court found that the
relevant factors listed in the Albion Automotive case of 2002 were
not the last view on the proper approach to cases of this kind
and/or applied without thought as to the kind of definitive
checklist

Wade v Sheffield Hallam University UKEAT/0194/12

Mrs Wade was employed by the University between 1980 and January
2012 as a librarian. She became disabled and various adjustments
were made to enable her to perform her role, including an
arrangement for her to work at home. She was placed on garden leave
from December 2005 until her dismissal in January 2012. She was
interviewed for a vacancy which arose in July 2006 but was
unsuccessful. When she was not appointed Mrs Wade complained about
having to go through the competitive interview process. This was a
provision criterion or practice which put her at a substantial
disadvantage. She considered an adjustment should have been made
given her disability and lengthy absence from work to waive this
requirement. She alleged in her disability discrimination claims
that the University had failed to make a reasonable adjustment in
respect of the interview process.

Mrs Wade was unsuccessful before the ET who held that it would
not have been reasonable for her employer to waive the interview
requirement. She appealed to the EAT where she was also
unsuccessful. The EAT found that the duty to make reasonable
adjustments was engaged but the University had not breached its
duty in this case. It was acting reasonably in insisting on the
essential requirements of the job being met. It could not be a
reasonable adjustment for the employer to appoint someone to a role
where the person failed to meet the essential requirements of the
job. The decision in the 2004 case of Archibald v Fife about
waiving any competitive interview process is not authority that
such an adjustment would be reasonable in every case.

Key point: Core competencies of a job should be
met by any candidate and it is not reasonable adjustment for an
employer to dilute them where the candidate is plainly not suitable
for the role.

18. INSOLVENCY – RECOVERY OF ARREARS OF PAY

The Secretary of State for Business v McDonagh and others
UKEAT/0207/12 and UKEAT/0312/12

In these two cases the employees started working for their
respective employers after the employers had entered into a
creditors voluntary arrangement. Both employees were unaware of
this when they started work. Each company was eventually
compulsorily wound up and the employees were dismissed. They
brought claims for wages and holiday pay from the National
Insurance Fund but this was refused on the basis that the companies
were both insolvent when they entered into their CVAs and this was
the appropriate date for the admissibility of the debts. The
employees were successful in their claims for outstanding pay
before the employment tribunal but the Secretary of State appealed
which appeals were allowed. As the debts claimed by the two
employees were not owed at the dates when the CVAs were approved,
they could not be recovered. The EAT acknowledged this resulted in
unfair consequences for the employees who were then left without a
remedy. Nevertheless, it was for Parliament to decide whether this
consequence should be reversed to mitigate against this loss of
protection for debts arising after insolvency, not the EAT.

Key point: Employees may have to consider
undertaking full due diligence on their employer if there is any
doubt about its financial stability before they take up their
employment.

19. 2012/2013 STATISTICS

The Tribunal Service has published its latest round of
statistics for the year to March 2013. There has been a fall in of
39% in the number of claims for failure to inform and consult on
TUPE but an equal and opposite rise of 39%in the claims for failure
to inform and consult on redundancy. There is a 75% rise in the
number of sex discrimination claims but a 24% fall in the number of
age discrimination claims. The total number of claims was
191,541.

20. COSTS AWARD

Vaughan v London Borough of Lewisham
UKEAT/0533/12/SM

Ms Vaughan brought 3 sets of proceedings against her employer
Lewisham which culminated in a 20 day hearing following which the
entirety of her claims were dismissed. She was ordered to pay 1/3
of Lewisham's costs which were claimed at some £260,000
so her liability for costs could be for those as high as
£87,000. She challenged the costs award on the basis that she
had no ability to meet these costs. She was unsuccessful.

It was held that the tribunal was not wrong in awarding Lewisham
1/3 of their costs. Although she was unemployed and would find it
difficult to pay she was nevertheless obliged to satisfy the order
in full in the fullness of time as there was a realistic prospect
of her returning to employment and making a payment of costs. The
tribunal found that her claims were unsustainable and misconceived
from the outset. Neither the Tribunal nor Lewisham had given her
any warning that her claims were regarded as misconceived or
otherwise ill-advised but that did not matter. If a costs warning
letter had been sent it was held that she would not have taken any
notice of it.

Key point: Justice requires compensation and
lay people are not immune from orders for costs.

21. COVERT SURVEILLANCE – WAS SUBSEQUENT DISMISSAL
UNFAIR?

City and County of Swansea v Gayle UKEAT/0501/12

The Council engaged a private investigator to film Mr Gayle
outside the sports centre when he should have been working. This
was after he was seen earlier playing squash at the local sports
centre when he should have been at work. The Council dismissed Mr
Gayle for leaving work for his own personal reasons and claiming
pay for the time he was not at work. Mr Gayle brought a claim for
unfair dismissal in which he was successful but he was awarded no
compensation on the basis of contributory fault. The tribunal
concluded that the process by which the Council dismissed Mr Gayle
involved an unjustified interference with his article 8 rights to a
private life and the Council was in breach of its obligations under
the Data Protection Act 1998. The Council appealed the finding of
unfair dismissal.

The EAT held that the tribunal's criticisms of the Council
for covertly filming Mr Gayle were irrelevant to the question of
the fairness of his dismissal. There was no breach of article 8, he
was a fraudster and as such he could have no reasonable expectation
of privacy. The Employment Practices Code under the Data Protection
Act states that it is rare for covert monitoring of workers to be
justified. However, Mr Gayle was filmed in a public place where he
had no reasonable expectation of privacy. Covert filming did not
impact on the fairness of the dismissal save to confirm Mr
Gayle's fraud. He was not unfairly dismissed.

Key point: The case does not suggest that
covert surveillance as a part of a disciplinary investigation will
always be proportionate or reasonable. Employers should always
consider less intrusive ways of checking up on employees if fraud
or malingering is suspected.

22. DISCLOSURE OF EMAILS

Fairstar Heavy Transport NV v Adkins and anor 2013 EWCA Civ
886

Mr Adkins was the former CEO of Fairstar. He had been contracted
as a CEO by a separate company controlled by him and registered in
Jersey. Following a hostile takeover of Fairstar it sought access
to emails in his possession related to its business affairs.
Surprisingly, the emails were stored on his personal computer while
he was CEO, as correspondence sent to the Company email address
were automatically forwarded to his personal email address and
deleted from the Company server without copies being retained.

Adkins would not allow Fairstar access to inspect the emails and
a High Court judge refused a formal application to inspect based on
an unnecessary consideration of whether the content of the emails
was "information". This was overturned in the Court of
Appeal who held that the High Court Judge was wrong in not making
an order for the inspection where Mr Adkins and Fairstar had been
agent and principal. A principal is entitled to production by an
agent of documents relating to the affairs of the principal.
Documents in this context included information recorded, held or
stored on a computer. The termination of the agency did not
therefore terminate the duty on Mr Adkins to allow Fairstar to
inspect the emails relating to its business as a result of the
agency relationship. An inspection and copying remedy was ordered
based on rights and duties incidental to the relationship that
existed between the parties at a relevant time and it was not
necessary to decide the property issue in order to make such an
order.

The English court had jurisdiction to decide Fairstar's
claim to inspect and obtain copies of the emails on the computer in
England even though the English court had no jurisdiction on the
contractual or company law matters in issue.

Key point: The question of property in emails
remains an uncertain area as the content of emails is information
and information is not recognised by law as property.

23. DEATH IN SERVICE BENEFIT RECOVERABLE

Fox v British Airways plc 2013 EWCA Civ 972

The Court of Appeal in this case upheld the EAT's decision
that a father could claim compensation for the full value of a
death in service pay out in unfair dismissal and discrimination
proceedings brought on behalf of his deceased son. In the original
claim the Tribunal found that the estate was only entitled to
£350 to reflect the cost of life assurance.

Mr Fox was dismissed by BA due to his lack of fitness for work.
Five days after he left he had surgery intending to make himself
fit for work. However he died 20 days later aged 44. Had he not
been dismissed his estate would have been entitled to a contractual
death in service benefit of £85,000. The EAT considered that
there was no reason for denying this compensation to his estate.
The appropriate sum was £85,000 on the basis that it was
inconceivable that the costs of providing for payment of the lump
sum within such a short period would have been any less than the
sum itself.

BA appealed unsuccessfully. The benefit in question formed part
of Mr Fox's remuneration and its loss was a real pecuniary loss
suffered by him. If the estate can establish that Mr Fox was
unfairly or discriminatorily dismissed the estate will be entitled
to recover the full sum by way of damages.

Key point: In ordinary cases the appropriate
sum will be the cost of obtaining insurance to provide equivalent
benefits. If that route is not available so that the Tribunal has
to value the loss itself normally the loss will be less than a
certainty and the exercise will be one of valuation of a lost
chance.

24. BINDING AGREEMENT – NOT SUBJECT TO CONTRACT

Newbury v Sun Microsystems 2013 EWHC 2180

This case provides a salutary lesson for solicitors and their
clients. The case concerned whether a claim and counterclaim had
been compromised on the correspondence passing between the
parties' solicitors and when a binding agreement was entered
into.

An offer to settle was sent by the Defendants to the
Claimant's solicitors on 3 June and it was accepted that
evening just before the start of an 8 day trial. It was marked
without prejudice save as to costs and at the settlement was to be
recorded in a suitably worded agreement. The Claimants'
solicitors forwarded a draft Tomlin order recording the terms
agreed but these were not agreed. No other agreement was reached
about the wording. The Defendants' case was that a concluded
agreement was not reached save in principle only and it depended on
the agreement on other matters, namely the execution of a suitably
worded agreement. Until that agreement was reached there was no
binding agreement between the parties.

Mr Justice Lewis in the Queen's Bench Division disagreed.
The Judge found that on the construction of the correspondence the
Defendants' offer letter was intended to be a binding offer
capable of acceptance. Importantly, however, the letter was not
expressed to be subject to contract. Had those words been used it
would have been clear that the terms were not yet binding or agreed
until a formal contract was agreed. The absence of those words
indicated the letter was an offer of terms, capable of acceptance
as it stood and was not intended to be subject to discussion on
agreement on additional or different terms. The settlement was not
conditional on the execution of a formal agreement. The offer and
acceptance letters themselves constituted a binding agreement.

Key point: If a binding agreement is to be avoided until further
terms and conditions have been agreed, then any offer should be
marked "subject to contract".

25. EU LAW – FRANCE

France has put in place a new legal framework for employment
law. The new measures include taxation and fixed term contracts,
minimum working time for part-time jobs, internal and external
mobility, measures aimed at anticipating economic difficulties,
reform of mass redundancies and new rights for employers
representatives bodies. Employers with interests in France should
make themselves aware of these changes. Source: Jeantet et
Associés.

26. AGE DISCRIMINATION

Engel v Transport and Environment Committee of London
Councils ET2200472/12

Mr Engel was a parking adjudicator. He complained to an
employment tribunal that he had been discriminated against on the
grounds of age when his appointment was renewed in December 2011
for a shorter period than other younger adjudicators. The
retirement age for adjudicators was set at 70 and when his
appointment was renewed it was only to end on 10 May 2013, the date
he turned 70.

The Committee admitted that its decision amounted to direct age
discrimination but relied on the justification defence, that the
unfavourable treatment was proportionate namely on the grounds of
independence, resources and dignity. In short, a retirement age of
70 was a proportionate means of ensuring the competence of parking
adjudicators without inter alia having to apply capability
procedures to older adjudicators in order to remove them from
office. 70 was consistent with the age for most Judges to
retire.

Despite this, the tribunal found that the Committee had failed
to demonstrate that the choice of 70 as an automatic retirement age
was either appropriate or reasonably necessary to achieve any of
its three legitimate aims. So Mr Engel was successful in his claim
and he was awarded £6,000 for injury to feelings.

Key point: The case turned on its facts and the
nature of the evidence. The hurdles an employer has to surmount to
establish "legitimate aims" are high and providing
sufficient evidence as well as argument is critical.

27. TERMINATION PAYMENTS AND COMPROMISE AGREEMENTS

Reid v HMRC 2012 UKFTT182 and Johnson v HMRC 2013
UKFTT242

These two cases concern compromise agreements and the dispute
with HMRC about the amount of tax payable. Both Mr Reid and Mr
Johnson joined RR Richardson as directors and had contracts of
employment. They both resigned from the company in December 2007
and received termination payments under separate but materially
identical compromise agreements. Both agreements provided that
first the termination payments included the entitlement to
statutory redundancy pay and secondly the company agreed not to
make any deduction on the first £30,000 of the termination
payment.

In their tax returns for the relevant years both Mr Reid and Mr
Johnson subtracted £30,000 and a further
£30,000 in respect of repayments of £30,000 which they
had each paid into an enterprise management incentive option scheme
("EMI Scheme") when they joined the company. Accordingly
they were to be taxed on the balance of their termination payments
which amounted to their total termination payments less
£60,000. HMRC demanded further tax of approximately
£12,000 from each of them. This related to the further
£30,000 omitted from both tax returns in relation to the EMI
scheme repayments as HMRC could find nothing in the compromise
Agreements to support the claims that £30,000 of the
termination payments were repayments under the EMI scheme. There
was evidence available which demonstrated that the £30,000
payments were repayments under the EMI scheme but HMRC refused to
consider this evidence because of the entire agreement clause in
the compromise agreement.

The question therefore for the FTT was whether the entire
agreement clause prevented HMRC and/or FTT from considering the
evidence when interpreting the compromise agreements.

In Reid, the FTT agreed with the HMRC so the FTT was unable to
consider any extraneous evidence. Mr Reid was liable for the
additional £12,000 tax. However, in Johnson the FTT found
that HMRC could not rely on the entire agreement clause, because it
was not a party to this compromise agreement. HMRC therefore was
obliged to look at the surrounding circumstances to determine the
nature of the termination payment. The FTT held Mr Johnson did not
have to pay additional tax as the Reid case was not binding in the
Johnson case. There are now two conflicting decisions. The Johnson
view is probably fairer.

Key point: The decision highlights the
importance when drafting settlement agreements to label clearly and
accurately the constituent parts of any termination payment to
minimise the risk of a dispute arising with HMRC.

28. HARASSMENT CLAIM – POST COMPROMISE

Hurst v Kelly UKEAT/0167/13

Ms Hurst was employed by PH Jones Limited at a call centre in
Stevenage as was Mr Kelly who was her line manager. In September
2010 her employment ended and she entered into a compromise
agreement which precluded her from bringing a claim against her
employer arising out of her employment and its termination. In
October 2010 Ms Hurst lodged a claim in the tribunal against Mr
Kelly only alleging sexual harassment against him in March and July
2010 at work related functions under the Sex Discrimination Act
1975. Mr Kelly denied the allegations in his ET3.

The matter came on for a full tribunal hearing on 6 December
2012 when Mr Kelly did not appear. The tribunal identified a
preliminary jurisdictional issue to be determined which was whether
Ms Hurst could bring a claim against a fellow employee only where
her former employer was not party to the proceedings. The tribunal
decided it had no jurisdiction to hear the claim and it was
dismissed. She appealed.

The tribunal was not referred to the judgment of the EAT in
Barlow v Stone of 1 June 2012 in which it was held by the EAT that
it was not necessary for a Claimant to bring a
claim against a former employer in order to proceed against a
fellow employee who is alleged to have discriminated against
him/her by way of victimisation in the course of employment.

The case was therefore remitted to a fresh tribunal to determine
Ms Hurst's claim on its merits. The Tribunal made the point
that Mr Kelly put forward as a defence in his ET3 that he was not
acting in the course of his employment, so his employer could not
have been vicariously liable for his acts.

Key point: In similar circumstances employers
should seek a release and discharge from any further claim against
its employees in any settlement agreement.

29. ILLEGAL WORKING IN THE UK – CROATIAN NATIONALS

Guidance for employers on hiring Croatian nationals following
Croatia's accession to the EU on 1 July 2013
has been issued by the Home Office. Croatians who wish to work in
the UK will need permission to do so unless specifically exempt
from this requirement and employers should undertake the necessary
checks to ensure they have obtained permission. If employers do not
carry out their duty in checking the documents and they employ a
Croatian illegally a civil penalty of up to a maximum of
£5,000 for each illegal Croatian worker can be imposed.

30. MISUSE OF CONFIDENTIAL INFORMATION

Whitmar Publications v Gamage 2013 EWHC 1881 Chancery
Division

Whitmar is a publications company specialising in magazines for
the printing industry. In May 2013 it commenced proceedings against
several former employees for damages for breach of contract, an
account of profits, damages for breach of fiduciary duties and a
permanent injunction restraining the defendants from using and
disclosing its confidential information obtained during their
employment by Whitmar. The outcome of the application was a matter
of life or death for the Defendants and any injunction granted
would be likely to dispose of the action.

Whitmar submitted that there was a good arguable case against
the Defendants that they had acted in breach of their contracts and
their obligations as employees. Each was placed on garden leave
upon resigning. It was claimed they had taken impermissible
preparatory steps to complete with Whitmar by soliciting staff and
business to compete with Whitmar they had also misappropriated and
misused confidential information. The former employees had also
allegedly taken away Whitmar's circulation database and
customer database and business cards.

The Defendants denied liability of any competitive activity
during the course of their employment and there were no restrictive
covenants prohibiting any competition post termination. The Judge
however concluded that they had taken more than just preparatory
steps but active steps to compete. There were clear examples of the
desire for secrecy as in one email the Defendants' emphasised
that traces of their emails had been destroyed. There was a strong
case that business cards did provide the Defendants with a
competitive advantage and that springboard relief should be
granted. The circulation database and customer database were
Whitmar's confidential information. The Judge held that Whitmar
had a very good chance of succeeding at trial and therefore a
springboard injunction was granted until Trial to prevent the
Defendants from making use of the advantages they had acquired in
the interim.

Key point: Employers seeking injunctions of
this nature are reminded that the outcome will depend on the
Judge's assessment of the weight of the evidence including the
employees' use of LinkedIn

groups, the setting up of a company by the employees and the
secrecy of how they went about planning their activities pre
post-employment.

31. SETTLEMENT AGREEMENT – SUM TO BE PAID NET OR GROSS OF
TAX

Barden v Commodities Research Unit International 2013 EWHC
1633

Mr Barden and the Defendants reached an agreement during the
course of a mediation that the Defendants would by 4pm on 11
November 2012 pay £1.35m by Telegraphic Transfer into the
Claimant's solicitors' client account at HSBC Bank.

Under this agreement Mr Barden alleged that the Defendants were
obliged to pay the full gross sum into this account and pay another
identical sum by way of PAYE to HMRC. The Defendants contended that
they were entitled and indeed obliged by law to pay only a net sum
having deducted PAYE income tax. They paid £67,176.16 to HMRC
and the balance into Mr Barden's solicitors' bank account.
The Settlement Agreement was subject to a Tomlin Order and as a
result when this dispute over the sums due arose an application
notice was issued under the liberty to apply reserved in that
Order. The issue to be determined was the true meaning of the
settlement agreement.

Mr Barden claimed that he did not agree to settle his claims for
£1.35m less the tax that would be deducted. The settlement
came about as a result of a mediation late in the evening. The
Defendants' case was that the agreed settlement sum was a gross
figure which represented the totality of what the Defendants would
have to pay. The Claimant wanted £1.35m as an all-inclusive
figure. Mr Perlman the Chairman of the Defendants signed the
Settlement Agreement at home at 12.30am. His only concern was that
the Defendants did not have to pay more than the agreed sum of
£1.35m. His understanding was that tax would have to be paid
but tax was not discussed during the mediation. The Judge found
that the fact that the Defendants' experienced advisers lost
sight of the tax question when they drafted the settlement terms
late in the evening, was irrelevant and was as a consequence of the
not unusual situation of a settlement finally reached in the early
morning when the parties had been sufficiently worn down by the
day's negotiations eventually to show their hands.

The Judge found that any objective observer would, taking into
account the relative factual matrix, irrespective of their
subjective intentions in the course of their negotiations, have had
no doubt that the Settlement Agreement meant that the sum of
£1.35m agreed should be paid to Mr Barden net of any PAYE
that was due from him to HMRC as a result of the payment. The
construction advanced by Mr Barden that the Defendants were
required to pay an additional £1.35m to HMRC was a commercial
absurdity.

The common intention of the parties that the offer of
£1.35m should be inclusive of costs and interest and tax
continued up until the moment the Settlement Agreement was signed.
Mr Barden's point that in making his offer "all in"
did not include tax but that did not reflect the reality of what
was discussed. The offer was made on the basis that the sum
mentioned was to be the entire liability of the Defendant. As an
alternative the Judge held that if he was wrong about the
construction of the Settlement Agreement then the conditions for
common mistake rectification were made out and he would have
ordered rectification so as to read ".... the £1.35m,
net of any PAYE due to HMRC....." In summary the Settlement
Agreement was to be construed meaning that the payment of
£1.35m due to Mr Barden should be paid net of any PAYE due to
HMRC by him.

Key point: Parties should be very clear and
careful about income tax and liability therefor which arises on any
settlement sum. In most cases the payment to be made will be net of
any tax liablity.

32. CHOICE OF COMPANIONS AT GRIEVANCE HEARING

Toal v GB Oils 2013 WL3450708

This case concerned whether the choice of a companion to
accompany an employee at a grievance hearing must be
reasonable.

The two applicants Mr Toal and Mr Hughes raised grievances with
their employer. Each Claimant wished to be accompanied by Mr Lean
who was an elected official of Unite. GB Oils declined to allow
them to be accompanied by Mr Lean and they sought the assistance of
a fellow worker Mr Hodgkin. They were unsatisfied with the result
of the grievance hearings and they appealed. Mr Hodgkin was then
replaced by another union official, a Mr Silkstone. Each Claimant
complained about the refusal to allow Mr Lean to accompany them.
The Tribunal found, however, that on Mr Lean being rejected they
chose another companion and had therefore waived the potential
breach by the Respondent when their grievances were concluded with
their chosen representatives. Both Claimants appealed.

The EAT considered that there had been a breach by GB Oils and
it remitted the case to the employment tribunal to determine the
amount of compensation to be paid by each Defendant. It declined to
make an order of compensation of £1,600 to each Claimant,
being an amount not exceeding 2 weeks' pay. If there was no
proven loss or detriment then only nominal compensation in the sum
of £2 should be ordered. The EAT also rejected the guidance
at paragraph 36 in the relevant ACAS Code of Practice relating to
the reasonableness of the choice of companion as creating more
problems than it solved. To exercise the right to be accompanied a
worker must first make a reasonable request. What is reasonable
will depend on circumstances of each individual case.

Key point: If a worker reasonably requests to
be accompanied by a companion at a disciplinary or grievance
hearing under section 10 of the Employment Relations Act 1999 that
is an absolute right but the choice of a particular companion does
not have to be reasonable. If an employee's first choice of
companion is refused the employee will not waive the right to be
accompanied by that companion if he then chooses another, but with
little compensation for breach this right is practically
valueless.

33. EMPLOYER PENSIONS CALCULATOR

An online pension calculator has been developed by the
Association of Business Insurers and is available on The Pensions
Advisory Service (TPAS) website here. It will assist employers in selecting the
most suitable automatic enrolment scheme for their employees. The
calculator is intended to form part of an employer's
decision-making process independently or with the support of its
adviser when it is selecting an automatic enrolment scheme.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will
post those changes on our site so our users are always aware of what information
we collect, how we use it, and under what circumstances, if any, we disclose it.
If at any point we decide to use personally identifiable information in a manner
different from that stated at the time it was collected, we will notify users by
way of an email. Users will have a choice as to whether or not we use their
information in this different manner. We will use information in accordance with
the privacy policy under which the information was collected.

How to contact Mondaq

If for some reason you believe Mondaq Ltd. has not adhered to these
principles, please notify us by e-mail at problems@mondaq.com and we will use
commercially reasonable efforts to determine and correct the problem promptly.